Cipla Ltd CIPLA) - ICICI Directcontent.icicidirect.com/mailimages/IDirect_Cipla_Q3FY20.pdf · With...

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Result

Update

CMP: | 440 Target: | 490 (11%) Target Period: 12 months

Cipla Ltd (CIPLA)

HOLD

February 7, 2020

Revenues upbeat but one-offs impact margins…

Revenues grew 9.1% YoY to | 4371 crore (I-direct estimate: | 4310 crore)

mainly due to 12.1% YoY growth in the domestic market to | 1777 crore (I-

direct estimate: | 1564.3 crore). US revenues grew 11.4% YoY to | 946 crore

(I-direct estimate: | 996 crore). EBITDA margins declined 31 bps, 334 bps

YoY, QoQ, respectively, to 17.3% (I-direct estimate: 20.5%) due to drop in

gross margin (62.4% vs. 63.5% in Q3FY19). EBITDA grew 7.2% YoY to

| 758.3 crore (I-direct estimate: | 883.5 crore). PAT grew 5.7% YoY to | 351

crore (I-direct estimate: | 444.7 crore), in line with operational performance.

Product launches, front-end shift key for formulation exports

Formulation exports constitute ~55% of FY19 revenues. The company is

focusing on front-end model, especially for the US along with a gradual shift

from loss making HIV and other tenders to more lucrative respiratory and

other opportunities in the US and EU. We expect export formulation sales to

grow at 8% CAGR to | 11319 crore in FY19-22E. Key drivers will be a launch

of inhalers and other products in the developed markets.

Indian formulations growth backed by new launches

With ~5% market share, Cipla is the third largest player in the domestic

formulations market. The acute, chronic and sub-chronic revenues for the

company are at 36%, 60% and 4%, respectively. Domestic formulations

comprise ~38% of total FY19 revenues. It commands ~20% market share

in the respiratory segment. We expect domestic formulations to grow at 8%

CAGR in FY19-22E to | 7955 crore driven by improved productivity of the

newly inducted field force and product launches.

Valuation & Outlook

Key takeaway from Q3 numbers were restoration of growth trajectory in the

domestic formulations, decent US growth but subdued margins. In its quest

for improving focus the company has restructured its total business into four

verticals namely, One-India, South Africa & EMs, US generics & specialty and

Lung leadership. While India focus will be on branded (Bx) and trade

generics (Tx), the US focus will be on specialty including hospitals and value

accretive generics. On the Africa front, the company continues to rebase its

business model towards private business in the backdrop shrinking tender

opportunities. Another key aspect to watch would be recalibration of R&D.

Across the board transformation from tenderised model to private model in

the exports market and towards rapid consumerisation of important Tx and

Bx in India is likely to continue for some time and this may have some

implications on the quarterly performances. We arrive at a target price of

| 490 based on 18x FY22E EPS | 27.3.

Key Financial Summary

(|crore) FY19 FY20E FY21E FY22E

CAGR

(FY19-22E) %

Revenues 16362.4 17082.3 18795.1 20581.9 7.9

EBITDA 3097.3 3376.5 3603.9 4155.1 10.3

EBITDA margins (%) 18.9 19.8 19.2 20.2

Adjusted PAT 1496.1 1661.4 1799.2 2198.0 13.7

Adj. EPS (|) 18.6 20.6 22.3 27.3

PE (x) 23.7 21.3 19.7 16.1

EV to EBITDA (x) 11.9 10.4 9.4 7.7

RoNW (%) 10.0 10.1 10.0 11.1

RoCE (%) 10.9 12.7 13.1 14.6

Source: ICICI Direct Research; Company

Particulars

Particular Amount

Market Capitalisation | 35446 crore

Debt (FY19) | 4316 crore

Cash (FY19) | 619 crore

EV | 39143 crore

52 week H/L (|) 586/390

Equity capital | 161.1 crore

Face value | 2

Key Highlights

Key takeaway from Q3 numbers were

restoration of growth trajectory in the

domestic formulations, decent US

growth but subdued margins

Across the board transformation from

tenderised model to private model in

the exports market and towards rapid

consumerisation of important Tx and

Bx in India is likely to continue for

some time. This may have some

implications on the quarterly

performances

Maintain HOLD

Research Analyst

Siddhant Khandekar

[email protected]

Mitesh Shah, CFA

[email protected]

Sudarshan Agarwal

[email protected]

ICICI Securities | Retail Research 2

ICICI Direct Research

Result Update | Cipla Ltd

Exhibit 1: Variance Analysis

Q3FY20 Q3FY20E Q3FY19 Q2FY20 YoY (%) QoQ (%) Comments

Revenue 4,371.0 4,309.6 4,007.5 4,395.8 9.1 -0.6YoY growth mainly due to strong growth in domestic branded

formulations and the US

Raw Material Expenses 1,645.0 1,465.2 1,462.7 1,461.2 12.5 12.6

Gross Profit 2,726.0 2,844.3 2,544.9 2,934.6 7.1 -7.1

Gross Margin (%) 62.4 66.0 63.5 66.8 -114 bps -439 bpsIncluded ~200 bps of one offs pertaining to impact of finished

goods inventory adjustment (one-time)

Employee Expenses 745.5 754.2 717.9 761.6 3.9 -2.1

Other Expenditure 1,222.2 1,206.7 1,119.3 1,263.4 9.2 -3.3

Total Operating Expenditure 3,612.7 3,426.1 3,299.9 3,486.3 9.5 3.6

EBITDA 758.3 883.5 707.7 909.5 7.2 -16.6

EBITDA (%) 17.3 20.5 17.7 20.7 -31 bps -334 bpsDecline and miss vis-à-vis I-direct estimates mainly due to one-off

impact in gross margins

Interest 46.2 46.1 44.2 46.1 4.5 0.2

Depreciation 277.9 283.0 293.1 283.0 -5.2 -1.8

Other income 72.1 86.2 78.5 100.5 -8.1 -28.2

PBT before EO 506.4 640.6 448.9 681.0 12.8 -25.6

Less: Exceptional Items 0.0 0.0 0.0 0.0 0.0 0.0

PBT 506.4 640.6 448.9 681.0 12.8 -25.6

Tax 152.8 185.8 125.7 200.6 21.6 -23.8

Tax Rate (%) 30.2 29.0 28.0 29.4 218 bps 73 bps

MI & Share of loss/ (gain) asso.-11.7 9.2 -10.0 9.7 NA PL

Adjusted PAT 351.0 444.7 332.2 464.8 5.7 -24.5Lower YoY growth and miss vis-à-vis I-direct estimates mainly in

sync with operational performance

Key Metrics

Domestic 1777.0 1564.3 1585.0 1745.0 12.1 1.8

YoY growth mainly due to strong growth in branded formulations.

Trade generic business grew 7% YoY. Beat vis-à-vis I-direct

estimates mainly due to higher-than-expected growth across

segments

US 946.0 996.3 849.0 953.0 11.4 -0.7

YoY growth mainly due to new product launches. Miss vis-à-vis I-

direct estimates mainly due to lower-than-expected growth in

existing products

EU 190.0 217.4 189.0 190.0 0.5 0.0

South Africa 594.0 601.6 557.0 546.0 6.6 8.8 Constant currency growth was 20% YoY

RoW 559.0 601.7 573.0 646.0 -2.4 -13.5YoY decline and miss vis-à-vis I-direct estimates mainly due to

postponement of shipment

API 165.0 169.4 154.0 157.0 7.1 5.1

Source: ICICI Direct Research

Exhibit 2: Change in Estimates

(| Crore) Old New % Change Old New % Change

Revenues 16,861.1 17,082.3 1.3 18,444.3 18,795.1 1.9

EBITDA 3,328.7 3,376.5 1.4 3,688.9 3,603.9 -2.3

EBITDA Margin (%) 19.7 19.8 7 bps 20.0 19.2 -83 bps

PAT 1,719.4 1,661.4 -3.4 1,889.9 1,799.2 -4.8

EPS (|) 21.4 20.6 -3.6 23.5 22.3 -4.8

FY20E FY21E


Exhibit 3: Change in Estimates

Current Comments

(| crore) FY19 FY20E FY21E FY22E FY20E FY21E

Domestic 6,273.0 6,457.0 7,231.8 7,955.0 6,073.0 6,801.8 Changed mainly due to growth recovery in trade generics business

Export Formulations 9,005.0 9,348.5 10,291.3 11,319.4 9,451.4 10,271.0

API 699.0 678.0 711.9 747.5 696.7 731.5

Earlier





Conference Call Highlights

The company plans to invest aggressively in the established India

branded market and continue focused investments in South Africa,

while calibrating investments in US generics and specialty business

In India, the branded business grew 14% YoY and trade generics

grew 7% YoY. The company has also acquired Vysov (from

Novartis) and in-licensed Elores brands (from Venus Remedies)

The management has undertaken a restructuring exercise of its

entire business into four verticals – One India, South Africa & EMs,

US generics & specialty, and Lung leadership

They have guided at increased focus on India business through

‘One-India’ vertical, which will focus more on the distribution

channel across prescription (Px), trade generics (TGx) and consumer

health (Cipla Health) business

South Africa business growth was led by robust growth in private

market business of 20% YoY in local currency terms. The company

is planning to expand its OTC presence in the market

Emerging markets decline was due to delay in order shipment to

Q4FY20. It has launched several products post the partnership with

Novartis in Australia, Sri Lanka and is also progressing well with its

biosimilars pipeline. The company is also focusing on establishing

itself in China, other than the markets of Australia, New Zealand,

Algeria, Morocco and some parts of Southeast Asia

Gross margins were affected by one-time shelf stock adjustment for

gSensipar price erosion, and reduction in the finished goods

inventory. As per the management, revenues from gSensipar have

mostly normalised now. Going forward, gross margins may be

~63%, 64%, respectively

In US specialty business, the company plans to focus on setting up

an institutional business and is planning to out-license its CNS

products in near term

The Advair trials are almost completed (US$25 million cost in FY20)

with filing expected by end of FY20. It has filed the NDA for IV

Tramadol (via Avenue Therapeutics) and expects to launch Albuterol

in H2FY21

The company expects to launch limited competition products

shortly. The company has also acquired Zemdri

R&D for Q3FY20 was at | 308 crore (7% of sales), which includes the

ongoing clinical trials for its respiratory products. Going forward, the

company expects R&D cost as percentage of sales to come down as

the company is planning to rationalise the pipeline under

development and focus on large value accretive assets in the US

specialty segment

Tax rate for FY20 is expected to be 29-30%




Exhibit 4: Trends in quarterly financials

(| crore) Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 YoY (%) QoQ. (%)

Net Sales 3550.0 3487.0 3432.3 3988.2 3834.5 3495.8 3845.8 3947.9 3906.2 4271.0 3894.5 4264.2 4234.6 8.4 -0.7

Other Operating Income 97.2 95.0 92.7 94.2 79.3 202.2 93.2 64.0 101.3 133.0 94.6 131.5 136.5 34.6 3.7

Total Operating Income 3647.2 3582.0 3525.1 4082.4 3913.8 3698.0 3939.0 4011.9 4007.5 4404.0 3989.0 4395.8 4371.0 9.1 -0.6

Raw Material Expenses1301.1 1315.5 1176.7 1553.1 1378.4 1330.3 1423.9 1412.1 1462.7 1485.8 1196.3 1461.2 1645.0 12.5 12.6

Gross Profit 2346.1 2266.5 2348.4 2529.3 2535.4 2367.7 2515.1 2599.8 2544.9 2918.2 2792.7 2934.6 2726.0 7.1 -7.1

Gross Profit Margins 64.3 63.3 66.6 62.0 64.8 64.0 63.9 64.8 63.5 66.3 70.0 66.8 62.4 -113.6 -439.2

Employee Expenses 633.1 638.9 672.9 660.8 657.3 699.0 714.0 712.2 717.9 712.5 756.1 761.6 745.5 3.9 -2.1

% of revenues 17.4 17.8 19.1 16.2 16.8 18.9 18.1 17.8 17.9 16.2 19.0 17.3 17.1 -85.7 -27.1

Other Expenditure 1035.4 1121.4 1029.0 1064.1 1059.4 1111.8 1074.7 1185.3 1119.3 1244.7 1131.9 1263.4 1222.2 9.2 -3.3

% of revenues 28.4 31.3 29.2 26.1 27.1 30.1 27.3 29.5 27.9 28.3 28.4 28.7 28.0 3.1 -78.0

Total Expenditure 2969.6 3075.8 2878.6 3278.0 3095.2 3141.1 3212.6 3309.7 3299.9 3442.9 3084.4 3486.3 3612.7 9.5 3.6

EBITDA 677.7 506.2 646.5 804.4 818.7 556.9 726.4 702.2 707.7 961.0 904.6 909.5 758.3 7.2 -16.6

EBITDA (%) 18.6 14.1 18.3 19.7 20.9 15.1 18.4 17.5 17.7 21.8 22.7 20.7 17.3 -30.9 -334.1

Interest 59.3 33.4 27.9 42.0 9.2 35.2 35.1 44.4 44.2 44.8 52.1 46.1 46.2 4.5 0.2

Depreciation 257.7 632.2 213.4 302.2 522.4 284.8 241.0 281.9 293.1 510.3 268.0 283.0 277.9 -5.2 -1.8

Other Income 153.5 22.8 151.4 113.3 52.9 40.0 170.1 132.6 78.5 95.4 78.4 100.5 72.1 -8.1 -28.2

PBT 514.1 -136.6 556.6 573.5 340.1 276.9 620.4 508.5 448.9 501.3 662.9 681.0 506.4 12.8 -25.6

Total Tax 128.3 -75.7 130.8 137.4 -64.2 46.2 173.7 142.4 125.7 127.8 192.2 200.6 152.8 21.6 -23.8

PAT before MI 385.8 -60.9 425.8 436.1 404.3 153.2 446.7 366.1 323.2 373.6 470.7 480.4 353.6 9.4 -26.4

Minority Interest 10.1 -1.0 16.1 12.4 2.9 -25.4 5.7 10.1 -10.0 -9.5 -31.0 9.7 -11.7 17.0 -220.5

Net Profit 375.7 -59.9 409.7 423.7 401.4 178.6 441.0 356.0 333.2 383.1 501.7 470.8 365.2 9.6 -22.4

EPS (|) 4.7 -0.7 5.1 5.3 5.0 2.2 5.5 4.4 4.1 4.8 6.2 5.8 4.5





Company Background

Formed by Dr KA Hamied way back in 1935, Cipla is one of the oldest

ventures set up by an Indian in the pre-independence era. With 34

manufacturing facilities spread over seven different locations, Cipla has a

gamut of therapeutic offerings ranging from simple anti-infectives to

complex oncology products. The product basket includes ~2000+ products

encompassing almost all therapies and over 40 dosage forms. The facilities

have been approved by various agencies such as the USFDA, WHO-Geneva,

MHRA-UK, TGA-Australia, SUKL-Slovak Republic, APVMA-Australia, MCC-

South Africa, PIC-Germany, Danish Medical Agency, Anvisa-Brazil,

INVIMAColombia, NDA-Uganda, Department of Health-Canada and MOH-

Saudi Arabia, among others. So far, the company has not faced any cGMP

issues or import alerts from any regulatory authorities.

Cipla’s business model focuses on having marketing partnerships with local

companies across the globe. Most partners are large generic players in

developed countries. The company has partnership deals with ~22 partners

in the US and ~65 in Europe. Cipla has also formed strategic alliances for

product development, registration and distribution of its products. For non-

regulated markets, the company has maintained long-standing relationships

with non-government organisations and institutions globally. However,

recent JVs and buying out front-end companies stakes in majority of its

markets shows Cipla’s clear intension to shifting its partnership model to

own front-end model in almost all markets including the US.

Exports constitute around ~59% of total sales. The company exports both

APIs and formulations to more than 170 countries including advanced

regions such as the US and Europe. Cipla derives 21% of its export revenues

from US followed by 13% from South Africa and 17% from RoW markets.

On the product filing front, Cipla has filed 253 ANDAs with the USFDA

cumulatively (FY19). The company spends 7-8% of revenues on R&D.

The company acquired two US-based companies, InvaGen Pharmaceuticals

and Exelan Pharmaceuticals. InvaGen Pharma has 40 approved ANDAs, 32

marketed products, and 30 pipeline products for which it expects to get

approvals over the next four years. The above pipeline also includes five

FTFs, which represent a market size of ~$8 billion in revenue by 2018. The

transaction is valued at US$550 million and is an all-cash deal. Combined

revenues of these two companies in CY14 were ~US$200 million (~US$225

million TTM June 2015) with EBITDA margins of ~25%. Its revenue grew at

~20% CAGR over the last three years.

In the domestic market, Cipla remains among the top five players, thanks to

a gamut of product offerings, which covers almost all therapies built on a

network of ~7500 medical representatives (MRs) covering a doctor base of

~5,00,000. As per MAT March 2019 AIOCD ranking, Cipla ranked third with

a market share of 4.73%. Breaking it down further, its ranking in chronic

therapies was at 2nd

.

Respiratory therapy accounts for ~20% of Cipla’s turnover. The company

introduced Salbutamol tablets in 1976 and Salbutamol inhaler in 1978 for

the first time in India. Since then, Cipla has consistently introduced new

products for asthma, chronic obstructive pulmonary disease (COPD) and

allergic rhinitis (AR). More recently, the company did the same in other

diseases such as pulmonary arterial hypertension (PAH), lung cancer and

idiopathic pulmonary fibrosis (IPF).




Exhibit 5: Revenues to grow at CAGR of 8% over FY19-22E

Source: ICICI Direct Research, Company

Exhibit 6: Domestic to grow at CAGR of 8% over FY19-21E


Exhibit 7: US to grow at CAGR of 11% over FY19-21E


Exhibit 8: EBITDA & EBITDA margins trend


Exhibit 9: PAT & PAT margins trend


Exhibit 10: RoE & RoCE trend


Exhibit 11: Consolidated revenue break-up

(| crore) FY16 FY17 FY18 FY19 FY20E FY21E FY22E CAGR FY19-22E %

Domestic 5036.0 5523.0 5867.0 6273.0 6457.0 7231.8 7955.0 8.2

Export Formulations 7798.0 8145.2 8237.2 9005.0 9348.5 10291.3 11319.4 7.9

US 2037.9 2625.0 2589.5 3420.0 4016.0 4297.3 4727.0 11.4

EU 543.4 545.0 623.0 700.0 817.0 939.6 1080.5 15.6

South Africa (Cipla Medpro) 1562.4 1828.8 2061.8 2148.0 2226.0 2404.1 2596.5 6.5

RoW 3396.5 3146.4 2970.7 2737.0 2289.4 2650.3 2915.4 2.1

APIs 752.0 523.0 626.0 699.0 678.0 711.9 747.5 2.3


11345.4

13657.514630.3

15219.316362.4

17082.3

18795.1

20581.9

0.0

5000.0

10000.0

15000.0

20000.0

25000.0

FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

(|

crore)

Revenues

CAGR 9.6%

CAGR 7.9%

4825 50365523

58676273 6457

7232

7955

0.0

2000.0

4000.0

6000.0

8000.0

10000.0


(|

crore)

Domestic

CAGR 6.8%

CAGR 8.2%

871

2038

2625 2589

3420

4016

4297

4727

0.0

500.0

1000.0

1500.0

2000.0

2500.0

3000.0

3500.0

4000.0

4500.0

5000.0


(|

crore)

US

CAGR 40.8%

CAGR 11.4%

2161.7

2480.2 2475.8

2826.4

3097.3

3376.5

3603.9

4155.1

18.2

16.9

18.618.9

19.8

19.2

20.2

12.0

16.0

20.0

24.0

0.0

500.0

1000.0

1500.0

2000.0

2500.0

3000.0

3500.0

4000.0

4500.0


(%

)

(|

crore)

EBITDA EBITDA Margins (%)

2161.7

2480.2 2475.8

2826.4

3097.3

3376.5

3603.9

4155.1

18.2

16.9

18.618.9

19.8

19.2

20.2

12.0

16.0

20.0

24.0

0.0

500.0

1000.0

1500.0

2000.0

2500.0

3000.0

3500.0

4000.0

4500.0


(%

)

(|

crore)

EBITDA EBITDA Margins (%)

13.8

11.8

7.7

9.610.9

12.7 13.1

14.6

11.1

12.9

8.0

10.4 10.0 10.1 10.011.1

0.0

5.0

10.0

15.0

20.0

25.0


(%

)

RoCE (%) RoNW (%)




Exhibit 12: One-year Forward PE of Company vs NSE500 Index

Source: ICICI Direct Research, Bloomberg

Exhibit 13: Financial Summary

Revenues Growth EPS Growth P/E EV/EBITDA RoNW RoCE

(| crore) (%) (|) (%) (x) (X) (%) (%)

FY19 16362 7.5 18.6 1.3 23.7 11.9 10.0 10.9

FY20E 17082 4.4 20.6 11.0 21.3 10.4 10.1 12.7

FY21E 18795 10.0 22.3 8.3 19.7 9.4 10.0 13.1

FY22E 20582 9.5 27.3 22.2 16.1 7.7 11.1 14.6


10.0

20.0

30.0

40.0

50.0

2/6/2017

8/6/2017

2/6/2018

8/6/2018

2/6/2019

8/6/2019

2/6/2020

(x)

Cipla NSE500 Index

6% Discount




Exhibit 14: Recommendation history vs. Consensus

Source: ICICI Direct Research; Bloomberg

Exhibit 15: Top 10 Shareholders

Rank Investor Name Filing Date % O/S Position (m) Change

1 Hamied Yusuf K 30-Jun-19 20.3 163.97m 0.0m

2 ICICI Prudential AMC 31-Dec-19 6.0 48.62m (1.0)m

3 Hamied Mustafa Kamil 30-Jun-19 4.3 34.57m 0.0m

4 Life Insurance Corp Of India 30-Jun-19 3.5 28.07m 10.0m

5 First State Investments 30-Jun-19 3.1 25.19m 14.3m

6 HDFC AMC 31-Jan-20 3.1 24.80m (0.0)m

7 Vaziralli Samina 30-Jun-19 2.2 17.91m 0.0m

8 Ahmed Sophie 30-Jun-19 1.9 15.47m 0.0m

9 Aditya Birla Sun Life AMC 31-Dec-19 1.8 14.86m 1.4m

10 Reliance Capital Trustee Co Ltd 31-Dec-19 1.7 13.93m (0.3)m


Exhibit 16: Shareholding Pattern

(in %) Dec-18 Mar-19 Jun-19 Sep-19 Dec-19

Promoter 36.7 36.8 36.7 36.7 36.7

Others 63.3 63.2 63.3 63.3 63.3


0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

0

100

200

300

400

500

600

700

800

Feb-20

Jan-20

Nov-19

Oct-19

Sep-19

Aug-19

Jun-19

May-19

Apr-19

Mar-19

Jan-19

Dec-18

Nov-18

Oct-18

Sep-18

Jul-18

Jun-18

May-18

Apr-18

Mar-18

Jan-18

Dec-17

Nov-17

Oct-17

Sep-17

Jul-17

Jun-17

May-17

Apr-17

Mar-17

(%

)(|

)

Price Idirect target Consensus Target Mean % Consensus with BUY




Financial Highlights

Exhibit 17: Profit & Loss (| crore)

(Year-end March) FY19 FY20E FY21E FY22E

Revenues 16,362.4 17,082.3 18,795.1 20,581.9

Growth (%) 7.5 4.4 10.0 9.5

Raw Material Expenses 5,784.5 5,838.4 6,672.2 7,203.7

Gross Profit 10,577.9 11,243.8 12,122.8 13,378.2

Employee Expenses 2,856.5 3,042.0 3,256.3 3,513.0

Other Expenditure 4,624.1 4,825.3 5,262.6 5,710.1

Total Operating Expenditure 13,265.1 13,705.7 15,191.2 16,426.8

EBITDA 3,097.3 3,376.5 3,603.9 4,155.1

Growth (%) 9.6 9.0 6.7 15.3

Depreciation 1,326.3 1,106.7 1,155.7 1,204.7

Interest 168.4 190.5 149.4 114.1

Other Income 476.6 324.7 375.9 411.6

PBT 2,079.1 2,404.0 2,674.6 3,247.9

Total Tax 569.5 706.2 775.6 941.9

PAT before MI 1,509.6 1,697.8 1,899.0 2,306.0

Minority Interest -3.7 -25.1 38.2 46.4

Adjusted PAT 1,496.1 1,661.4 1,799.2 2,198.0

Growth (%) 1.3 11.0 8.3 22.2

EPS (Adjusted) 18.6 20.6 22.3 27.3


Exhibit 18: Cash Flow Statement (| crore)


Profit/(Loss) after taxation 1,485.9 1,661.4 1,799.2 2,198.0

Add: Depreciation 1,326.3 1,106.7 1,155.7 1,204.7

(inc)/Dec in Current Assets -911.0 -409.4 -1,130.6 -988.9

inc/(Dec) in Current Liabilities -152.5 146.4 321.9 290.4

Others -57.5 190.5 149.4 114.1

CF from Operating activities 1,691.1 2,695.6 2,295.6 2,818.3

Change In Investment -1,068.4 0.0 -500.0 -1,000.0

(Purchase)/Sale of Fixed Assets -682.9 -500.0 -500.0 -500.0

Others 62.1 -15.5 48.3 57.0

CF from Investing activities -1,689.2 -515.5 -951.7 -1,443.0

Change in Equity 0.1 0.0 0.0 0.0

Change in Loan -60.3 -1,700.0 -500.0 -500.0

Dividend & Dividend tax -284.1 -289.2 -268.5 -328.0

Others -4.5 -190.5 -149.4 -114.1

CF from Financing activities -348.7 -2,179.8 -917.9 -942.1

Net Cash Flow -346.8 0.3 426.0 433.2

Cash and Cash equ. at beginning 965.6 618.8 619.1 1,045.1

Cash 618.8 619.1 1,045.1 1,478.3

Free Cash Flow 1,008.2 2,195.6 1,795.6 2,318.3


Exhibit 19: Balance Sheet (| crore)


Equity Capital 161.1 161.1 161.1 161.1

Reserve and Surplus 14,851.1 16,223.3 17,754.0 19,624.0

Total Shareholders funds 15,012.3 16,384.4 17,915.1 19,785.2

Total Debt 4,316.2 2,616.2 2,116.2 1,616.2

Deferred Tax Liability 425.3 446.6 468.9 492.4

Long Term Provision 121.4 127.5 133.9 140.5

MI & Other Liabilities 802.7 801.2 864.1 936.5

Source of Funds 20,678.0 20,375.9 21,498.2 22,970.8

Gross Block - Fixed Assets 10,795.9 11,295.9 11,795.9 12,295.9

Accumulated Depreciation 4,118.6 5,225.3 6,381.0 7,585.8

Net Block 6,677.4 6,070.6 5,414.9 4,710.2

Capital WIP 676.2 676.2 676.2 676.2

Fixed Assets 7,353.6 6,746.8 6,091.1 5,386.4

Investments 2,616.0 2,616.0 3,116.0 4,116.0

Goodwill on Consolidation 2,869.1 2,869.1 2,869.1 2,869.1

Long term Loans & Advances 0.0 0.0 0.0 0.0

Other Non current assets 825.8 867.1 910.4 956.0

Inventory 3,964.8 4,126.6 4,638.9 5,079.9

Debtors 4,150.7 4,320.1 4,856.4 5,318.0

Loans and Advances 6.3 6.6 6.9 7.3

Other Current Assets 1,558.2 1,636.1 1,717.9 1,803.8

Cash 618.8 619.1 1,045.1 1,478.3

Total Current Assets 10,298.8 10,708.5 12,265.2 13,687.3

Creditors 1,948.0 2,027.5 2,279.2 2,495.8

Provisions 736.8 773.6 812.3 852.9

Other current libilities 600.6 630.6 662.2 695.3

Total Current Liabilities 3,285.4 3,431.7 3,753.6 4,044.0

Net Current Assets 7,013.5 7,276.8 8,511.6 9,643.3

Application of Funds 20,678.0 20,375.9 21,498.2 22,970.8


Exhibit 20: Key Ratios (| crore)


Per share data (|)

Adjusted EPS 18.6 20.6 22.3 27.3

BV per share 186.5 203.5 222.5 245.7

Cash per Share 7.7 7.7 13.0 18.4

Dividend per share 3.5 3.6 3.3 4.1

Operating Ratios (%)

Gross Margins 64.6 65.8 64.5 65.0

EBITDA margins 18.9 19.8 19.2 20.2

PAT Margins 9.1 9.7 9.6 10.7

Inventory days 88.4 88.2 90.1 90.1

Debtor days 92.6 92.3 94.3 94.3

Creditor days 43.5 43.3 44.3 44.3

Asset Turnover 0.8 0.8 0.9 0.9

EBITDA convsion rate 54.6 79.8 63.7 67.8

Return Ratios (%)

RoE 10.0 10.1 10.0 11.1

RoCE 10.9 12.7 13.1 14.6

RoIC 10.3 13.4 14.3 17.2

Valuation Ratios (x)

P/E 23.7 21.3 19.7 16.1

EV / EBITDA 11.9 10.4 9.4 7.7

EV / Net Sales 2.3 2.1 1.8 1.5

Market Cap / Sales 2.2 2.1 1.9 1.7

Price to Book Value 2.4 2.2 2.0 1.8

Solvency Ratios

Debt / EBITDA 1.4 0.8 0.6 0.4

Debt / Equity 0.3 0.2 0.1 0.1

Current Ratio 2.9 2.9 3.0 3.0





Exhibit 21: ICICI Direct Coverage Universe (Healthcare)

Company I-Direct CMP TP Rating M Cap

Code (|) (|) (| cr) FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19FY20EFY21EFY22E

Ajanta PharmaAJAPHA 1304 1,180 Buy 11378 43.5 43.5 63.4 76.2 30.0 30.0 20.6 17.1 21.8 21.8 20.8 21.9 17.1 17.1 16.0 17.2

Alembic PharmaALEMPHA 640 620 Hold 12065 31.4 31.4 26.6 31.0 20.4 20.4 24.1 20.6 19.6 19.6 13.4 14.9 21.8 21.8 13.3 13.8

Apollo HospitalsAPOHOS 1645 1,800 Buy 22887 17.0 17.0 43.7 68.1 97.0 97.0 37.6 24.1 8.8 8.8 14.8 17.5 7.1 7.1 14.9 19.6

Aurobindo PharmaAURPHA 511 475 Hold 29912 42.1 42.1 56.5 60.8 12.1 12.1 9.0 8.4 15.9 15.9 15.9 16.3 17.7 17.7 17.0 15.6

Biocon BIOCON 296 310 Hold 35466 6.2 6.2 10.3 15.7 47.6 47.6 28.7 18.9 10.9 10.9 15.1 19.4 12.2 12.2 14.7 18.6

Cadila HealthcareCADHEA 273 260 Hold 27958 18.1 18.1 16.6 18.7 15.1 15.1 16.5 14.6 13.0 13.0 11.7 12.4 17.8 17.8 13.5 13.6

Cipla CIPLA 440 490 Hold 35446 18.6 18.6 22.3 27.3 23.7 23.7 19.7 16.1 10.9 10.9 13.1 14.6 10.0 10.0 10.0 11.1

Divi's Lab DIVLAB 2023 1,850 Hold 53704 51.0 51.0 58.4 71.0 39.7 39.7 34.7 28.5 25.5 25.5 22.1 22.8 19.4 19.4 17.0 17.6

Dr Reddy's LabsDRREDD 3159 3,000 Hold 52473 114.8 114.8 154.4 180.9 27.5 27.5 20.5 17.5 11.1 11.1 15.0 17.5 13.6 13.6 14.5 14.9

Glenmark PharmaGLEPHA 319 410 Hold 9000 26.9 26.9 36.7 46.1 11.9 11.9 8.7 6.9 15.3 15.3 15.0 17.0 13.5 13.5 14.0 15.1

Hikal HIKCHE 130 160 Buy 1594 8.4 9.6 11.1 13.3 15.6 13.5 11.7 9.7 14.3 13.3 13.6 14.5 13.6 14.1 14.2 14.9

Ipca LaboratoriesIPCLAB 1240 1,355 Buy 15673 35.1 35.1 60.3 74.9 35.4 35.4 20.6 16.6 15.0 15.0 19.9 21.2 14.2 14.2 18.0 18.9

Indoco remediesINDREM 225 240 Hold 2072 -0.3 3.0 8.4 15.1 -714.3 76.1 26.8 14.9 1.0 4.6 9.3 15.3 -0.4 4.0 10.1 15.4

Lupin LUPIN 722 810 Hold 32695 16.5 16.5 35.0 37.1 43.6 43.6 20.6 19.5 9.4 9.4 9.9 12.1 5.4 5.4 8.4 8.3

Narayana HrudalayaNARHRU 356 360 Buy 7274 2.9 2.9 9.8 13.3 122.6 122.6 36.4 26.7 7.7 7.7 13.9 16.5 5.5 5.5 14.5 16.7

Natco PharmaNATPHA 644 595 Hold 11713 34.9 34.9 23.7 22.0 18.4 18.4 27.2 29.2 21.3 21.3 12.2 10.5 18.5 18.5 10.0 8.6

Sun Pharma SUNPHA 431 470 Hold 103325 15.9 15.9 20.2 24.7 27.2 27.2 21.3 17.4 10.3 10.3 11.4 12.6 9.2 9.2 9.8 10.8

Syngene Int. SYNINT 315 360 Buy 12612 8.3 8.3 9.6 12.0 37.0 37.0 31.7 25.6 14.8 14.8 13.1 15.1 16.8 16.8 14.1 14.9

Torrent PharmaTORPHA 2001 2,020 Hold 33868 48.9 48.9 71.5 91.8 40.9 40.9 28.0 21.8 14.2 14.2 18.4 21.2 17.5 17.5 19.1 20.7

RoE (%)EPS (|) PE(x) RoCE (%)





RATING RATIONALE

ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its

stocks according to their notional target price vs. current market price and then categorises them as Buy, Hold,

Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as

the analysts' valuation for a stock

Buy: >15%;

Hold: -5% to 15%;

Reduce: -5% to -15%;

Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]




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